For the second time this year, Iraq has removed the head of South Oil Company (SOC), the biggest of its three state-owned oil producers. The move came as the government approved a plan to re-establish a national oil company to oversee most operations in Iraq's oil and gas sector. Fayad al Nema, who last month criticised the oil ministry's plan to auction off contracts to foreign companies to raise production from Iraq's biggest oilfields, has been transferred to a ministry job, according to Ali al Dabbagh, an Iraqi government spokesman.
Mr al Dabbagh said no decision had been made about who would be the new managing director of SOC. Mr al Nema replaced Kifah Numan as head of the company in May, just a year after Jabbar al Luaibi stood down from the post after clashing with the ministry. Mr Numan had been Mr Luaibi's deputy, and was also critical of Iraq's oil minister, Dr Hussain al Shahristani. Mr al Nema, however, was presumed to be loyal to the minister.
Nonetheless, he quickly joined a revolt of SOC managers and engineers against ministry plans to award Iraq's first major oil deals in more than 30 years to foreign firms, saying the proposed long-term service contrast would be "put the Iraqi economy in chains and shackle its independence for the next 20 years" while squandering state revenues. Mr al Nema complained that foreign companies were getting a chance to develop fields into which Iraq had already poured US$8 billion (Dh29.36bn) of investment.
Mr al Dabbagh said yesterday that Mr al Nema's removal from SOC was related to an overhaul of the oil ministry. "There is restructuring at the oil ministry adopted by the prime minister to achieve competency in the administration of the oil ministry from a technical and administrative perspective," he told Reuters. That could be related to the cabinet proposal for a national oil company, which would revive the entity established in the 1960s that was merged into the Iraqi oil ministry in 1987. The long-awaited creation of such a company is a central plank in Iraq's plan to raise oil production while retaining control of its energy resources.
"Under the National Oil Company will be the Maysan Oil Company, the North Oil Company, South Oil Company. This will be very helpful in organising everything," said Shamkhi Faraj, a former oil ministry official. But the draft law to create the company requires the approval of Iraq's parliament, which is in recess until September. Even then, the parliament may not hasten to pass the law, as it is linked to other draft laws that have been stuck in parliament for the past two years.
"This law is connected to the oil and gas law; they're all one package. It's tied to a political issue," Mr al Dabbagh said. The energy package, which includes a revenue-sharing proposal, has pitted Iraq's minority Kurds against Arab leaders in Baghdad. The Kurds have moved aggressively to develop oil and gas resources in their semiautonomous northern enclave, running afoul of Dr al Shahristani, who has declared Kurdish deals with foreign oil companies "illegal".
The oil minister has set a target of raising Iraq's oil production to 4.5 million barrels per day (bpd) by 2015 from about 2.5 million bpd. In the auction the ministry held at the end of last month, only one contract was awarded out of eight on offer, as most of the 31 companies participating baulked at meeting Baghdad's maximum payment terms. BP and China National Petroleum Corporation agreed to boost output from Iraq's biggest oilfield to 2.85 million bpd from less than 1 million bpd for a fee of $2 for each additional barrel.